The arbitrage-free interval of American contingent claims with frictions

Qingxin Meng*, Maoning Tang

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


In a continuous-time Itô process market model with frictions in the form of percentage management costs and a higher interest rate for borrowing than for lending, the range of arbitrage-free prices of American Contingent Claims(ACCs) is derived, based on the principle of absence of arbitrage. Using the martingale approach, we obtain the upper and lower hedging price of ACCs.

Original languageEnglish
Pages (from-to)435-444
Number of pages10
JournalIndian Journal of Pure and Applied Mathematics
Issue number5
Publication statusPublished - Oct 2007


  • Contingent claims
  • Doob-Meyer decompositions
  • Hedging
  • Pricing


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